When you’re trading stocks, there’s always the potential to make a lot of money in a short period. However, you must approach it as a business if you want to trade stocks successfully. This means you must have a plan and stick to it, regardless of how the market performs. This article will give ten tips for treating day trading as a business!
Day trading is when a retail trader buys and sells a financial instrument within the same day or multiple times over a day. These small price movements can be a lucrative game if played correctly.
Many people think of trading as something you do on Wall Street with stocks, but that’s not the only kind of trading that goes on. Some estimate that more than $100 trillion worth of securities changes hands daily in what’s known as the “over-the-counter” (OTC) market. This includes everything from currencies to bonds to commodities like gold and oil.
Here are a few key reasons why day trading stocks is the best business model.
Be in Control: When you trade stocks you are your own boss and do not have to be accountable to anyone, but yourself. You make your own hours and decide how much money you want to make. There is no limit to the amount of money you can make trading stocks. It does not rely on selling products to others, but is based upon your skillset.
No Hidden Costs: Trading stocks is a low overhead business. There is no need to obtain inventory, rent office space, or hire employees. All you need is a computer and an internet connection.
No Glass Ceiling: Trading stocks is a very scalable business. You can start with as little as you have available to grow your account as big as you want.
Passive Income: Once your trading system is set up, it can make money for you 24 hours a day, even while you sleep.
Day Trading Compared to Other Business Models
Let’s review how day trading compares to other business models, like owning a restaurant.
Scalability Not Easy: First of all, trading is a business that can be scaled. You can be an active trader with as little or as much money as you want. With a restaurant, you would need to hire more employees or open more locations to scale the business, which would require even more business expenses.
Requires Constant Attention: Owning a restaurant requires you to be there to manage the staff and ensure the food is up to par. It requires a significant amount of time to fully operate the business. Whereas day trading can be completed at home or anywhere, you are available, even on vacation.
Riskier Investment: Another reason trading is better than owning a restaurant is that it’s not nearly as risky. With trading, you can always get out of a position if it’s going south. With a restaurant, you’re stuck with the lease, the staff, and all the other overhead costs.
Location Dependent: Lastly, trading is a business you can do from anywhere in the world. All you need available is a computer with internet access and access to a trading platform. You are not restricted to working from just one location as you are when you own a restaurant. If you open a restaurant in the wrong location, it is not easy to get out of it.
Tips to Starting A Trading Business
Although trading is not commonly referred to as a business by most people. To be successful, day trading should be treated like you would treat a business.
1. Have a trading strategy and plan. It’s truly one of the most important items for success before you even begin trading. Your trading plan should include your investment goals, risk tolerance, and the strategies you will use to make money.
2. Set clear limits on your losses. Trading stocks is all about managing your risk. You must set clear limits on how much you’re willing to lose on any given trade. Once you hit your stop loss, you need to get out of the trade immediately.
3. Don’t let emotions dictate your trading decisions. It is easy to drawn to the excitement of making a profit or the fear of losing money. However, it’s essential to stay calm and objective when trading stocks. Emotions can lead to impulsive decisions that can cost you money.
4. Have a diversified portfolio. When you’re trading stocks, you must have a diversified portfolio in your trading account. This means investing in various companies, so you’re not putting all your eggs in one basket.
5. Stay up-to-date on the latest news. The stock market is an ever changing marketplace, and it’s essential to stay up-to-date on the latest news. You can do this by reviewing financial publications or following financial news channels on television or online.
6. Money Management. A stop-loss order sells a security when it reaches a specific price. This method can help you limit your losses if the stock market declines.
7. Have realistic expectations. It’s an essential key to have realistic expectations when trading stocks. Sorry, but no one makes a fortune overnight, and you need to be prepared for losing streaks.
8. Be patient. Patience is key in trading stocks. You need to be willing to hold on to your investments for the long term if you want to be successful.
9. Scatter your eggs in more than one basket. This is similar to tip number four, but it’s worth repeating. You should never invest all of the money in your portfolio in one company or one sector.
10. Deduct business expenses. Retain your records for the amount of money spent to trade so that you can understand your net income for the year. Look for ways to write off tax deductions for items in your home office expenses, like your mortgage, utilities, or even your internet expenses.
Summary: Trading as a Business
Are you trading stocks as a hobby, or are you trading stocks as a business? If you want to be successful at trading, you need to start treating it like a business. This means setting up some ground rules and sticking to them.
Day trading can be a great way to make money, but it’s not for everyone. But, if you do what is necessary to put in the work, it can be a lucrative business.
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”